– Amazon.com, Inc. (NASDAQ:AMZN) and Phillips 66 (NYSE: PSX)
On a choppy day to kick off June, stocks fell for the second consecutive day. The Dow closed down 177 points, or 0.54%, the S&P 500 shed 0.75%, and the Nasdaq dropped 0.72%.
The indices began the day with gains but lost them throughout the day as reality set in about the economy’s health. Several analyst comments spooked investors throughout the day.
First, Barclays said that S&P 500’s valuations face a downside risk of about 10% if inflation doesn’t cool quickly.
After easing the fears of many anxious investors with relatively upbeat comments, JPMorgan CEO Jamie Dimon also seemed to change course. On Wednesday (June 1, 2022), Dimon said the economy is headed for a “hurricane” and cautioned, “you better brace yourself.”
Dimon’s especially worried about the Fed’s monetary tightening. The Fed hiked rates twice this year, and June 1, 2022, marked the start of its plan to reduce its balance sheet.
Job openings also fell sharply in April, and the ISM’s manufacturing PMI came in at an underwhelming 56.1 for May.
Yet there are opportunities in this market, and we may have seen the worst. There’s a chance that many of these economic fears have already been priced in.
Two of the best stocks to buy now are positioned very interestingly in this environment. First is Amazon.com, Inc. (NASDAQ:AMZN), a tech titan that’s fallen so hard and fast that it has nowhere else to go but up. It’s too big and too strong to stay down for much longer. Not to mention, it could have as much as 75% of room to run from here. Phillips 66 (NYSE: PSX) is also one of the best stocks to buy now. For obvious reasons too. It’s a perfect way to play soaring energy costs with plenty of room to run, judging by the $120 price target it just received from Piper Sandler.
It’s hard to find two companies more different than Amazon and Phillips 66. But in this market, sometimes it takes diversification and thinking outside the box to figure out the best stocks to buy now.
Amazon.com, Inc. (NASDAQ:AMZN)
Don’t bet against a tech giant that once crashed by 95%. It could have as much as 75% of upside and nowhere to go but up.
Amazon.com, and the tech sector as a whole, have had a brutal 2022. As a “colossal loser” this year, though, Amazon’s stock might have capitulated and could be at a level where you take a deep breath and say there’s nowhere else to go but up.
CNBC personality and “Mad Money” host Jim Cramer singled out Amazon on Tuesday (May 31, 2022) as a tech stock that’s fallen so far from its highs that it has nowhere else to go but up
Perhaps Cramer knows what he’s talking about. This downturn is child’s play compared to what happened to the AMZN stock during the dot-com bust. AMZN, at one point, crashed by over 95% to just over $5.50 a share.
We all know what’s happened since then.
In 2022, Amazon is more financially sound, diversified, and frankly “too big to fail” compared to two decades ago. The stock is down -35.31% from its all-time high and could be in a prime position for a reversal.
Amazon missed its first-quarter top-line and bottom-line estimates, and investors were understandably concerned. However, its revenue still managed to grow 7.30% year-over-year.
There are also signs that Amazon could be undervalued for the first time in who knows how long.
First, its forward P/E ratio is trading at a 44.32% discount relative to its history. AMZN is also trading below its normalized price-sales and price-book ratios, suggesting it could be undervalued intrinsically and on an accrual basis.
Source: Yahoo Finance
Amazon likely missed on its earnings because of systemic headwinds, aggressive reinvestment rates, and its investment in Rivian. Inflation and supply chains are also concerns. However, these are short-term concerns that should be corrected long-term.
Plus, if you look at Amazon’s fundamentals, there’s definitely a strong foundation.
Amazon has strong margins, which depict a profitable company that runs efficiently, such as its
Finbox data also shows that the Company could see its revenue balloon at a 28.1% CAGR over the next 5-years.
With AMZN surging over 20% in the last week, Barchart also spots its 20 Day Moving Average as a short-term technical BUY signal.
Analysts remain high on the stock’s upside too. TipRanks notes that based on 38 Wall Street analysts offering 12-month price targets for Amazon in the last 3 months, the stock is a STRONG BUY. A whopping 36 analysts rate Amazon a BUY compared to 1 rating it a HOLD and 1 a SELL. The average price target is $3,603.33 with a high forecast of $4,250.00 and a low forecast of $2,800.00. The average price target represents a 48.06% upside from the June 1, 2022’s closing price of $2,433.68.
Since May 27, four firms have also maintained bullish coverage on the stock.
- JMP Securities, MARKET OUTPERFORM
- Morgan Stanley, OVERWEIGHT
- Jefferies, BUY
- Loop Capital, BUY
AMZN’s year-to-date low and high are $2,025.20 and $3,428.00, respectively.
Phillips 66 (NYSE: PSX)
Piper Sandler sees this midstream and downstream operator running another 18.81% as energy costs continue soaring.
Phillips 66 is a prominent player in the oil, gas & consumable fuels industry. As both a midstream and downstream operator, it’s uniquely positioned to benefit from soaring energy prices and demand from all angles. As commodity prices continue elevating, it’s strategically generating revenue from the transportation of oil and liquid natural gas and the manufacture of petrochemicals and plastics.
As the EU agreed to ban 90% of Russian crude by the end of the year, crude booked its sixth straight monthly gain. U.S. natural gas prices also just hit $9 for the first time since 2008.
Needless to say, there are obvious catalysts that could keep pushing the PSX stock higher.
In its Q1 earnings report, Phillips 66 saw revenue soar 68% to $36.7 billion, led by its Chemicals and Refining businesses. Additionally, Wall Street continues bumping up its full-year outlook. It now forecasts PSX’s 2022 EPS to come in at $9.62– a $5.00 increase from previous estimates.
With demand for refined products such as gasoline, diesel, and jet fuel expected to remain red hot, this might only be the start.
PSX is up over 45% year-to-date.
It’s also seen its share price surge 18.68% since May 10, 2022.